We’ll be debating the timing of Britain’s fiscal budget squeeze until at least the next election. But what about the how?

On the Today programme this morning, Richard Murphy, director of Tax Research UK, made the case for raising an extra £47bn in taxes to fill the fiscal hole, almost entirely from the top 10% of earners or corporations. It has a good populist ring to it. But it doesn’t seem likely to win over the public – or most economists.

Flanders, a pure down the line economist is, of course, not convinced. She knows here bread is buttered by pandering to wealth. But she’s wrong about the electorate. Compass did some polling with YouGov on a sample of more than 1,000 people to support this report, which I co-wrote. The polling was pretty emphatic. There were three questions:

When all taxes are taken into account – income tax, national insurance, VAT, excise duties, council tax etc – the richest households pay a smaller share of their income in tax than the poorest households. The overall tax rate for the richest 10% is 34%; for the poorest 10% it is 46%. In principle, do you agree or disagree with this statement‚Ä¶?:

“The government should change the tax system to ensure that the richest households pay at least the same percentage of tax as the poorest households”

The finding to this one was 78% strongly in favour or agreeing; just 14% disagreed in part or strongly.

The second question was:

Until last year the starting rate of income tax was 10%, paid on the first £2,220 of taxable income. Last year this was abolished to pay for a 2p reduction in the standard rate of income tax. Do you agree or disagree with this statement‚Ä¶?:

“The government should restore the 10p starting rate by increasing taxes on the top 10% of households by income”

Here the finding to this one was 59% strongly in favour or agreeing; just 13% disagreed in part or strongly.

And finally they asked:

Some people say that the tax system should be changed to reduce the income of the richest 10%, and increase take home income for the remaining 90% of people. Their proposal has 4 key elements:

1. the income tax rate would be 50% for anyone earning more than £100,000 a year;

2. the cap on national insurance would be lifted and also applied to investment income;

1. the income tax rate would be 50% for anyone earning more than £100,000 a year;

2. the cap on national insurance would be lifted and also applied to investment income;

3. and new anti-avoidance rules would be introduced and simplified to ensure that all income, apart from standard personal allowances, is taxed;

4. the 10p starting rate of income tax would be restored.

Overall this new package would raise enough tax to allow government borrowing to be reduced sharply without major cuts in public spending and many economists believe the economy would be less likely to slip back into recession.

Which of these views comes closer to your own?

“This package is a good idea: it would make Britain fairer, it would assist the recovery by giving more money to 90% of all households, and ensure that our public services don’t suffer”

“This package is a bad idea: many high-paid people and international companies would move to other countries, and Britain’s economy would suffer”

Don’t know

And the finding to this one was 62% favoured the first statement, 25% the second and 13% did not know.

As such Stephanie Flanders is wrong: there is support for this package, it’s just not being offered to the public.The reality is that if it was it would be very popular indeed because people have an innate sense of justice that so far, and with regret, politicians will not respond to because economists say it does not exist. But it’s the economists (and especially economists like Flanders – ex the Institute for Fiscal Studies, I note) and not the people who are wrong.

And let’s ask the simple question that Stephanie Flanders seems to have ignored, but to which I drew attention in the interview. Why would a tax proposal that makes 90% of people significantly better off be unpopular? Come on Stephanie – you believe in rational people – so why would they vote against their self interest?

19 Responses

Using your definition of justice, you’ve provided evidence to support the first part of that, but I don’t see anything to support the second part. I believe that some people might want those with high incomes to pay more, but those on lower income to pay much less and overall expenditure to be cut.

As a person living outside the UK, can I suggest you just raise taxes on the rich and find out whether it raises more tax or not. Seems to me that neither of you have any evidence to sum up your positions so why not do the experiment and find out. After all, if 90% of people get a tax cut, overall services improve and the 10% that pay more aren’t bothered enough about it to leave, it seems a win-win situation.

As for Richard’s last question: “Why would a tax proposal that makes 90% of people significantly better off be unpopular? Come on Stephanie – you believe in rational people – so why would they vote against their self interest?”

Can I suggest the reason is because a large number of people want to be (or want their kids to be) in the top 10% of earners and so do not want to see what they aspire to be being penalised. Of course, most will never make it and the whole pursuit of money isn’t something that you approve of, but that’s where the self interest comes in.

“This package is a good idea: it would make Britain fairer, it would assist the recovery by giving more money to 90% of all households, and ensure that our public services don’t suffer”. 62% favoured this statement.

Paul, how is this not something to support “not cuts”? How is this not evidence that most, not some, people want those with high incomes to pay more?

Your comments come across as those of someone with opinions so strong that they can’t be influenced in any way by what is actually said.

nick james: “Paul, how is this not something to support “not cuts”? How is this not evidence that most, not some, people want those with high incomes to pay more?”

Because it’s a false dichotomy, something you’ve just re-iterated even more overtly in your response. You present a straight choice of either cuts, or higher taxes on those with higher incomes, when of course, they are not mutually exclusive.

For example, as an addition to the suggestion:

-The government should restore the 10p starting rate by increasing taxes on the top 10% of households by income

I would have been interested to see the approval to a supplementary suggestion:

-The government should reduce the starting rate to zero by increasing taxes on the top 10% of households by income and cutting expenditure.

“Your comments come across as those of someone with opinions so strong that they can’t be influenced in any way by what is actually said.”

Much of this is class-based nonsense. Of course a populace will say in a poll that the rich should be squeezed. Duh! They will also say they support being better off and having services protected. I’m suffering from deja moo.

Sadly, the UK government has been abyssmal with tax policy as a result of cretinous politicians and the hammering that McKinsey inflicted when creating HMRC, and so any rational moves are unlikely. I’m not even being party political here – the Tories appear to be berks too.

Richard and his pals see the vacuum and jump right in to whip up the populist agenda.

That’s a bit rich. When one of your tax proposals (one which I’m already on record as supporting by the way, you can look through CiF to see me writing about it if you like) is to raise the personal allowance to the full year, full time minimum wage…..exactly the same policy that the Adam Smith Inst has been pushing for a number of years. And which has subsequently been taken up by UKIP, by Oxfam and now by Compass.

If we’re so damn dangerous then why do you keep copying (without attribution I note) our ideas?

You’re still making an unwarranted assumption: that my plans will not raise the revenues I think they will.

No, Tim’s not making any assumptions at all. You’re making a claim about the tax-raising potential of a certain package of measures, and (as far as can be seen) bravely doing so without the aid of evidence. He has questioned your claim, putting the ball firmly in your court as the one making it. In response, you decide that ad hominem attacks are more productive than providing evidence. (Incidentally, I’m sure that you and Tim have ‘history’, but frankly, on the evidence of this thread, you’re the one who comes out ruder.) To me, that looks like an implicit admission that you don’t have the evidence.

So, here’s another chance. We know that it’s more popular. We know that you think it is more ‘just’. But can it deliver?

I’m not sure how many times the point has to be made. Worstall’s blogs are extremeist nonsense. Supporting the rich has led to disaster. The rich countries need a kick in the teeth. Not by the fat pigs in the banks, but by redistribution.

If humanity advances and evolves it won’t be Worstall’s bile that delivers it. It’s like reading the villains from Dickens or Shaw.

a) My main experience of Tim, such as it is, is from around the blogosphere: I’ve only visited his blog rarely. On those few occasions, he must have been behaving himself (or perhaps our standards of rudeness differ). I strictly limited my comments to this thread and acknowledged that there might be history of which I was unaware.

b) Published figures? See below.

c) Well of course, but everyone proposes anti-avoidance measures. It does sound rather like saying one can find massive savings in the policing budget by stopping people from committing crimes, though!

d) I don’t have to think anything: see below.

The key point here is that I’m not the one making a claim. I am not claiming your scheme doesn’t raise the sums you say it will. Let me repeat that. I am not claiming your scheme doesn’t raise the sums you say it will. I am saying I don’t believe your say-so. I am neutral on the truth value of your claim, which is why I wish to see evidence.

You noted my academic email address. You may further wish to note that I’m trained as a scientist rather than an economist, although my background is sufficiently numerate to follow a back-of-the-envelope calculation outside my field. You’ll also be aware that in the sciences, we have developed a scepticism towards claims until backed up with evidence. So far, all I’ve seen is bluster and attempts to shift the burden of proof.

Let me give two contrasting examples from the Compass report to illustrate this. Table 5 is sourced and gives hard figures which can be checked. I haven’t thought long and hard about this, but I’m guessing it’s probably possible to estimate the effect on the national finances from the table’s figures. So I can check your claim there (if I sit down when I’m more awake with a pencil and some paper!). I do question the assumptions about migration, avoidance and (something you don’t seem to deal with directly) simply not working as much, but accepting your assumptions for the moment, in principle I can make that check. Table 8 is probably reproducible as well. (As I say, it’s late and I’m only ‘eye-balling’ this.)

But your figures for NI and investment income? That’s £10bn nearly that you’ve not sourced at all as far as I can see. The footnote basically says, “Trust us.” What if someone doesn’t?